June 18, 2017 / 9:44 AM / 6 months ago

With a weakened leader and reeling from crisis, Britain hurtles into the Brexit unknown

LONDON (Reuters) - With her strategy unclear and her position insecure, Prime Minister Theresa May plunges this week into tortuous divorce talks with the European Union that will shape Britain’s prosperity and global influence for generations to come.

Britain's Prime Minister Theresa May and her husband Phillip arrive at a church in Sonning, Britain June 18, 2017. REUTERS/Kevin Coombs

At one of the most important junctures for Europe and the West since the 1991 fall of the Soviet Union, May’s government is reeling from a crisis of her own making - the loss of her parliamentary majority in a June 8 snap election she did not need to call.

Such is the collapse of May’s authority that her entire Brexit strategy is being picked apart in public by her ministers, her lawmakers and her allies on the eve of formal negotiations which begin in Brussels on Monday at 0900 GMT.

Despite signals from both France and Germany last week that Britain would still be welcome to stay if it changed its mind, Brexit minister David Davis insisted on Sunday there would be no turning back.

“As I head to Brussels to open official talks to leave the EU, there should be no doubt — we are leaving the European Union,” said Davis, who will launch the talks with chief EU negotiator Michel Barnier.

“Now, the hard work begins. We must secure a deal that works for all parts of the United Kingdom, and enables us to become a truly global Britain.”

Britain has less than two years to negotiate the terms of the divorce and the outlines of the future relationship before it is due to leave in late March 2019. Both sides need an agreement to keep trade flowing between the world’s biggest trading bloc and the fifth largest global economy.

But the other 27 members of the EU combined have about five times the economic might of Britain. They also have a strong incentive to deny the UK a deal so attractive it might encourage others to follow the British example.

With May still hammering out the details of a post-election deal to stay in power with the support of a small Northern Irish party, there are fears of a disorderly exit that would weaken the West, imperil Britain’s $2.5 trillion economy and undermine London’s position as the only financial center to rival New York.

Compounding the pressures on the British leader, she has been widely accused of failing to show enough empathy with victims of a horrific tower block fire in London last week.

One European diplomat in London said the political upheaval was such that it was difficult to know what to write back to his capital, pouring scorn on May’s campaign slogan of ‘strong and stable leadership’.

“What can you say of meaning about such chaos?” the diplomat asked. “I suppose it isn’t quite a strong and stable Brexit yet.”

WHAT KIND OF BREXIT?

Leaving the European Union was once far-fetched: only 15 years ago, British leaders were arguing about when to join the euro, and talk of an EU exit was the reserve of a motley crew of skeptics on the fringes of both major parties.

But the turmoil of the euro zone crisis, fears in Britain about immigration and a series of miscalculations by former Prime Minister David Cameron prompted Britain to vote by 52 to 48 percent for Brexit in a June 23 referendum last year.

Leaving the EU - the biggest blow since World War Two to European efforts at forging unity - is now the official consensus of both the Conservatives and the opposition Labour Party.

Amid such upheaval, though, there is little agreement on what kind of Brexit May should try for - even assuming she can hold onto her job.

“The United Kingdom’s political tectonic plates are moving at the very moment when we are negotiating Brexit,” said Anand Menon, professor of politics at King’s College London.

Before the election, May proposed a clean break from the EU: leaving its single market, which enshrines free movement of people, goods, services and capital, and proposing limits on immigration and a bespoke customs deal with the EU.

Opponents describe that as a “hard Brexit”. They argue instead for a “soft” version, prioritizing some form of continued access to the single market in order to minimize economic damage.

While European leaders try to gauge what to expect from Britain, May is so weakened that her own finance minister and the partners on whom she will rely for her majority, Northern Ireland’s Democratic Unionist Party, are giving her public guidance.

“My clear view, and I believe the view of the majority of people in Britain, is that we should prioritize protecting jobs, protecting economic growth, protecting prosperity as we enter those negotiations,” finance minister Philip Hammond said.

DOG‘S BREAKFAST

While Britain’s economy has shown unexpected resilience since the Brexit vote, there are signs of weakness. Business leaders say the uncertainty means they are having to plan on the assumption that Britain leaves without a proper deal.

“Everything is all over the place,” said a senior executive responsible for Brexit preparations at a FTSE 100 company. “It’s a bit of a dog’s breakfast at the moment because there is a lot of maneuvering and a lot of moving parts.”

Brexiteers accept there is likely to be some short-term economic pain but say Britain will thrive in the longer term if cut loose from what they see as a doomed experiment in German-dominated unity and excessive debt-funded welfare spending.

Opponents of Brexit fear that ditching a 60-year strategy of trying to hedge European integration with a special relationship with Washington or a brittle Commonwealth of former colonies would undermine what remains of Britain’s global influence.

The first issue at the Brussels talks will be the status of millions of EU citizens living in the United Kingdom and British residents of the other 27 countries, including their right to stay, to work, and to access medical care.

The extent of Britain’s exit bill needs to be decided, with the EU27 expected to seek tens of billions of euros they see as London’s fair share of programs to which it has committed.

The situation in Ireland - where the only land border between the EU and United Kingdom will lie - will also be discussed.

May wants to negotiate the divorce and the future trading relationship before Britain leaves, followed by what she calls a phased implementation process to give business time to prepare for the impact of Brexit.

The EU wants to deal with the first phase of divorce talks before moving on next year to discuss trade, though EU officials acknowledge that the agreements to be reached before Britain leaves can only be concluded as a whole package simultaneously.

Three days after the talks begin, May is due to travel to Brussels for an EU summit - a chance for the other 27 leaders to take stock of their negotiating partner in the sharply altered climate brought about by the dramas of the past two weeks.

Editing by Mark Trevelyan

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